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Liquidity ratios its me

1.
CURRENT RATIO Current AssetsCurrent ratio = ------------------------- Current Liabilities Year Current Assets Current Liabilities Current Ratio 2006-2007 24678965 21128392 1.16 2007-2008 21588683 11339964 1.90 2008-2009 20683915 25537988 0.80ANALYSISThe current ratio decreased to 1.16 in the year 2006-2007 , and again it is increased to1.90 in 2007-2008, later it is again fallen down to 0.80. This shows that there is noimprovement in the short-term solvency of the company for the year 2008-2009.

2.
2 2006-2007 1.8 2007-2008 1.6 2008-2009 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Current RatioINTERPRETATION: Due to instability in the rate of ratios, it shows that there is no improvement in theshort-term solvency of the company for the year 2008-2009.

3.
Liquid Assets Acid test ratio = ---------------------------- Current liabilities Year Liquid assets Current liabilities Liquid ratio 2006-2007 23362359 21128392 1.10 2007-2008 15428377 11339964 1.36 2008-2009 16701025 25537988 0.65ANALYSISThe liquid ratio is decreased to 1.10 in the year 2006-2007 , and again it is increased to1.36 in the year 2007-2008. This further confirms that there are fluctuations in theshort-term liquidity .

4.
1.4 2006-2007 2007-2008 1.2 2008-2009 1 0.8 0.6 0.4 0.2 0 Liquid ratioINTERPRETATION:This further confirms that there are fluctuations in the short-term liquidity of thecompany. This is mainly because of low realization of sundry debtors and an inincrease in quick assets and decrease in cash and bank.

5.
DEBT-EQUITY RATIO Total debts Debt-Equity ratio = ---------------------- Equity Year Total debt Equity Debt-Equity Ratio 2006-2007 24812845 28416205 0.87 2007-2008 15626471 28057713 0.56 2008-2009 14358681 30391887 0.47ANALYSISDebt equity ratio is 0.87 in 2006-2007 and it is decreased to 0.56 in the year 2007-2008 though it was decreased to 0.47 in the year 2008-2009. This shows that there isimprovement in the long-term solvency position of the company.

7.
EquityProprietory Ratio = ---------------------- Total Asset Year Equity Total Assets Proprietory Ratio 2006-2007 28416205 53229050 0.53 2007-2008 28057713 43684184 0.64 2008-2009 30391887 44750568 0.67 ANALYSIS This ratio is decreased in the year 2006-2007 to 0.53 when compared to 2005-2006 and further increased to 0.67 in the year 2008-2009 when compared to 2007-2008. this shows that there is an increase in the long-term solvency of the business.

10.
INVENTORY TURNOVER RATIO SalesStock Turnover Ratio = ---------------- Inventory Year Sales Inventory Stock turnover Ratio 2006-2007 483975 21 22444998 2.15 2007-2008 62649553 17500270 3.57 2008-2009 90124231 29520878 3.05 ANALYSIS Inventory turn over ratio has decreased to 2.15 in the year 2006-2007 when compared to 2005-2006 and again increased in the year 2007-2008 to 3.57 but in the year 2008-2009 it shows a fall that is 3.05.

13.
GRAPH SHOWING DEBTORS TURNOVER RATIO 2006-2007 16 2007-2008 14 2008-2009 12 10 8 6 4 2 0 Debtors Turnover RatioINTERPRETATION:This shows that the company is running out of cash shortage. Since creditfacilities are provided to debtors, it has lead to less avoid of competitors.

19.
GRAPH SHOWING FIXED ASSETS TURNOVER RATIO 2006-2007 12 2007-2008 10 2008-2009 8 6 4 2 0 Fixed assets turn over RatioINTERPRETATIONS:There is a an increase in fixed asset turnover ratios from year 2006-2007 and itremains almost the same for two year 2007 to 2009.

24.
OPERATING RATIO Operating costOperating ratio = ------------------------ * 100 Sales Year Operating Sales Operating cost Ratio 2006-2007 15647946 48397521 32.33% 2007-2008 11102218 62649553 18% 2008-2009 21072481 90124131 23.38%ANALYSISThe operating ratio in the year 2005-2006 increased to 32.33% . But it is increasedin the year 2007-2008 to 23.38% when compared to that of 17.72% in the year 2006-2007. So this is the reason for decline in the net profit of the company

26.
RETURN ON CAPITAL EMPLOYED Net profit before tax Return on capital employed = ----------------------------- * 100 capital employed Year Profit before Capital Return on tax employed capital employed 2006-2007 -106398 53229050 ------- 2007-2008 3711530 43684184 8.5% 2008-2009 2736963 44750568 6.1%ANALYSISThe return on capital employed ratio shows nil return on capital employed in the year2006-2007 because of losses incurred by the company in that year. In the next year itreaches to 8.5% which is 6.1% more when compared to the one in the year 2008-2009 .

28.
Net profit after tax – preference dividendEarning per share= ------------------------------------------------------------- no. of equity shares Year Number of Profit after Earnings equity shares tax per share 2006-2007 15000 ----------- -------- 2007-2008 15000 ----------- -------- 2008-2009 15000 2334174 156 ANALYSIS: The earnings per share have increased to 156 in the year 2008-2009 when compared to all the remaining previous year’s earnings per share.

29.
GRAPH SHOWING EARNING PER SHARE (EPS) 160 2006-2007 140 2007-2008 120 2008-2009 100 80 60 40 20 0 Earnings per shareINTERPRETATION:From the above table, it can easily understood that the company EPS issteadily progressed. The share capital of the company has increased withoutthe proportionate increase in the net income.

30.
1.In spite of incurring losses ,it has successfully managed to overcome this bymaking profits in future, which is a good sign of prosperity to the company.2.The long-term solvency position of the company has shown a recurrent increase.3.The sales of the company has increased in the year 2008-2009 which indicates thatthe foreign companies are well satisfied with the company’s product, which is agood sign to company’s prosperity.SUGGESTIONS1.Modern Collections should make proper financial planning so that the availablefunds are utilized in more efficient and effective manner.2.The company must try to maintain its short-term liquidity position, by investingonly in those investments, which are easily convertable into cashThe company should reduce the idle capacity in order to increase the efficiency inthe operations.3.Modern Collections must take immediate measures to reduce the length of theOperating cycle